Investment Promotion Direction

Electronics and Electrical Appliances Industry

By Ajarin Pattanapanchai Senior Executive Investment Advisor 14 January 2013
[ Updated as of 7 January 2013 ]

New Investment Promotion Strategy Direction Promote investment to restructure Thai economy for sustainable development and to overcome Middle Income Trap
Promote competitiveness development and value creation of industrial sector Promote green industry to drive balanced and sustainable growth Promote new industrial clusters in the regions to create new investment concentration Promote Thai overseas investment in order to increase competitiveness of Thai businesses
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10 Target Activities that will Transform Thai Economy

10 Target Industries
1. Basic infrastructure and logistics 2. Basic industry 3. Medical devices and scientific equipment 4. Alternative energy and environmental services 5. Services that support industrials sectors 6. Advanced core technology 7. Food and agricultural processing 8. Hospitality & Wellness 9. Automotive and transport equipment 10. Electronics and electrical appliances

Activity Selection Approach

Does the activity fall into any of the 10 target groups? - Value added - Industrial linkage - Level of technology - Labor-intensive - Common businesses which do not require promotion Y Does the activity fall into any of these categories? -Has a lot of environmental problems or consumes a lot of energy -Is concession business or monopoly business protected by the State -Conflicts with related regulation N Y N

Exit

High Tax Incentives (A1* - A3)

Sophistication of Production Process Medium Non-CIT Incentives (B1 B4)

Exit
Low

Exit

CIT Incentives Formulation Guidelines (A1*- A3)

Consideration guidelines
1. Sophistication of production process The more sophisticated and advanced technology , the better the incentives.
CIT incentives

CIT Incentives
A1* A1
8 Yrs. Without cap 8 Yrs

A2
5 Yrs

A3
3 Yrs

Sophistication of production process

High

Low

2. Comparison of tax incentives between Thailand and competitors (Malaysia, Indonesia, Vietnam) Are the new incentives attractive enough for investors ? The company data representing promoted activity and actual data from each country calculated by using Marginal Effective Tax Rates (METR) , which is an investment attractiveness indicator of each country. METR covers the tax structure, tax incentives, accounting method and other factors, excluding non-tax incentives.

The appropriate incentives that can be competitive.

This is the sample result from Marginal Effective Tax Rate calculation.

METR in Food Supplement Manufacturing ( data retrieved from sample companys financial statement )
CIT 20% 8-year tax holiday CIT 25% 10-year tax holiday + 50% for 2 years CIT 10% 4-year tax holiday + 50% for 9 years CIT 25% 5-year tax rate of 7.5%

(Higher scores are more attractive to investors. The most attractive country will have an index value equal to 100.)

Remark * Out of 102 activities (which are granted CIT incentives), 40 activities are selected for comparison.

Non-CIT Incentive Formulation Guidelines (B1 B4)

Consideration Guidelines
1. Activities eligible for non-CIT incentives must be in 10 target sectors, but the production process is less sophisticated. 2. Incentives granted vary depending on the need to import machinery or raw materials, to bring in skilled workers or foreign experts, and to own land.
B1

Non-CIT Incentives
Incentives Import duty exemption on machinery Import duty exemption on raw materials used in production for export. Non-tax Import duty exemption on machinery Non-tax Import duty exemption on raw materials used in production for export. Non-tax Non-tax e.g. Permission to own land Permission to bring in skilled workers and foreign experts to work in promoted projects

B2 B3

B4

Activities under New Investment Promotion Policy

Electronics and Electrical Appliances Industry: Group A
A1* 8-Yr-CIT Exemption without cap A1 8-Yr-CIT exemption (with cap) A2 5-Yr-CIT exemption without cap
1. Electronic design : - Micro Electronics Design - Embedded System Design 2. Manufacture of embedded software 1. Manufacture of products, parts, or materials in Organics & Printed Electronics (OPE) 1. Manufacture of enterprise software and/or digital content Digital Content : - Animation, Cartoon & Characters - Computer Generated Imagery (CGI) - Web-Based Application and Cloud Computing - Interactive Application - Game: Windows-based, Mobile Platform, Console, PDA, Online Game, Massive Multi-Player Online Game (MMOG), etc. - Wireless Location Based Service Content - Visual Effects - Multimedia Video Conferencing Applications

Activities under New Investment Promotion Policy

Electronics and Electrical Appliances Industry: Group A
A2 5-Yr-CIT exemption (with cap) 1. Manufacture of hard disk drives and/or hard disk drive parts (except top cover, base plate or peripheral for hard disk drives) 2. Manufacture of solid state drive and/or solid state drive parts 3. Manufacture of semiconductors 4. Manufacture of solar cells and/or raw materials for solar cells 5. Manufacture of parts and/or photonics equipment 6. Manufacture of products and/or parts for telecommunication 7. Manufacture of flexible printed circuits and/or multi-layer printed circuit boards 8. Manufacture of equipment for solar cell systems: - Solar Module - Charge Controller - Inverter - Battery (Storage) 9. Manufacture of electronic parts for vehicles and/or scientific equipment and/or medical equipment 10. Manufacture of material for microelectronics : - Wafer - Manufacture of materials using thin film technology 8

Activities under New Investment Promotion Policy

Electronics and Electrical Appliances Industry: Group A / B / Exit
A3 3-Yr-CIT exemption (with cap) 1. Manufacture of digital cameras 2. Manufacture of flat panel TV and/or flat panel displays 3. Manufacture of LED electric lamps 4. Manufacture of passive components 5. Manufacture of electro-magnetic products 6. Manufacture of compressor and/or motor for electrical appliances 7. Manufacture of printed circuit board assembly (PCBA), in general 8. Manufacture of top cover, base plate or peripheral for HDD 9. Manufacture of memory storage equipment, in general 10. Manufacture of air conditioners, refrigerators, freezers, washing machines, dryers 11. Manufacture of electronic products or parts for offices and/or industry and/or agriculture 1. Manufacture of electronic products, electrical appliances, or parts

B1 Import duty exemption on machinery and essential raw materials for use in production for export

Exit group E-commerce business

New Form of Incentives (More Merit, More Incentives)

Basic Incentives
New Project A1*
8 years without cap 8 years 5 years 3 years

(Only activities in Group A1, A2, and A3)

R&D (whether it is in-house, cooperation with educational or research institution, or donation to Technology and Human Resources Development Fund) The number of additional years of CIT exemption depends on the percentage of R&D expenditures to revenues: 1 % or not less than 150 million baht, one additional year of CIT exemption 2 % or not less than 300 million baht, two additional years of CIT exemption 3% or not less than 450 million baht, three additional years of CIT exemption and CIT exemption cap will also be removed. Environment (Obtain ISO 14000 certificate, Carbon Footprint or other standards approved by the Board of Investment) one additional year of CIT exemption

Merit-based Incentives

Expansion Project
8 years without cap 8 years 3 years 1 year

A1 A2 A3

Incentives to be granted

Expansion project is a project that existing BOI-promoted companies apply for promotion to invest in existing product without using more advanced technology or production process.

Projects located within industrial estates / promoted industrial zones one additional year of CIT exemption

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Thailand Board of Investment Ministry of Industry